UKC

I consulted an independent financial advisor recently, for the first time in my life. I had to move my pension to a new provider, as the current one has given up doing pensions.
I went on Money Saving Expert, saw their link to an IFA finder site, and arranged a meeting with a local IFA. We discussed the options, but when it came to his fee I was stunned. He wanted 1% of my total pension pot, every year, to manage it. That's about a quarter of my pension contributions going into his pocket. As I see it, he'd have to add over 30% value to everything that goes into the pension to cover his fee. I said no way, and agreed to a one-off payment of 1% for the move, no ongoing service. He's put the pension into managed funds with Aviva, they charge a management fee already. What value can he add to justify his fee? I couldn't get an acceptable explanation from him, so are there any IFAs on here willing to comment? Is an ongoing annual fee of 1% of the total pot normal? What does the customer get for this?

In reply to Hooo:

You are right that their fee is pretty unjustified. I am yet to be advised by an IFA on anything finance related. They are however very good at changing your address or changing the amount you pay in. You are also correct in calculating that a 1% fee relates to 30% of what your pot could be over its lifetime.

The thing that riles me, is that you can't deal with pension providers unless you go through an IFA. On the one had I understand that you should be advised before doing something you might regret but on the other hand, it is my money - surely I can do with it what I like?

Incidentally, my IFA only charges 0.5%. You should shop around!

In reply to Hooo:

Well at least it is now a bit more obvious. The problem is that the Industry got use to charging a lot more but it was hidden in Allocation Units etc and all front end loaded. This then made it attractive for IFAs to try and get people to move funds, churn them, usually for no real benefit other than to the IFA.

The best IFA I found, from a friends recommendation, he told me after a 1 hour free consultation, that it would not be worth my while using him since my requirements were simple and I could do it cheaply on line far more cheaply than the fees he would have to charge me.

In reply to Hooo:

Shop around and negotiate.

In reply to m0unt41n:


I am curious. When you say online, any particular site?

In reply to ByEek:

>


I just do it all online with no human I involved at all -quite typical I thought. Which provider won't talk to you?

In reply to ByEek:

>The thing that riles me, is that you can't deal with pension providers unless you go through an IFA. On the one had I understand that you should be advised before doing something you might regret but on the other hand, it is my money - surely I can do with it what I like?

I consolidated a couple of small pensions I had collected over the years into a SIPP. The providers were quite keen I wasn't going to sign it over to a 'pension liberation' company, and apart from being a slooow process it wasn't particularly hard.

In reply to ByEek:

He suggested Hargreaves Lansdown but I haven't done anything yet

In reply to m0unt41n:

Look in to a SIPP - (Self Investment pension Plan). I found it a fairly painless operation to move my pension in to a Hargreaves Lansdown one and then manage it myself - a good online front end and pretty simple to buy or sell in to various plans according to your needs. You can also trade in shares through it. There are various online providers available - you'll need to do a bit of reading up on the various fees and ways of investing - I found the Financial Times guide to be pretty clear.
Most of the funds are more like 0.1% management fee and some of the basic trackers are even less, which keeps the costs down to a sensible amount.
This puts you in the driving seat and having the app on your phone that gives you feedback on how your pot is performing gives you the impetus to actively manage it, rather than stashing money away and paying an IFA a fortune to do bugger all. It'll also give you the heebie jeebies when you see how quickly things move! Keep in mind that you are totally responsible though, no comeback on an IFA if things go pear shaped.
Best of luck

In reply to MG:

I had a few pension pots (still do) with Aegon. Same company. Same Stakeholder pension, just different account numbers. They are all languishing as I no longer work for the company that paid into them. I wanted to transfer the funds to my current (managed) pot. None would deal with me. I ended up going through my IFA who charged me 1%. It was only a £100 or so, but not bad for half an hours work.

The whole pension industry is a massive racket. I note on my annual statements that there are a couple of lines detailing charges. Yet there are pages and pages telling me what my pension might be worth.

In reply to ByEek:


Are you sure? I've bought a SIPP without ever consulting an IFA. For anyone with a decent amount of common sense and who is fairly numerate, managing your own through a SIPP is sensible.

As a general rule, no IFAs do not add value sufficient to justify their fees. Large areas of the financial industry have traditionally changed rip-off fees. That is slowly changing owing to government regulation.


Even that is 0.5% more than you need to pay. 0.5% per year compounded will add up.

In reply to Coel Hellier:

I have no idea if a SIPP is the same as a Stakeholder Pension, but if it isn't then if you ring up your pension provider asking for them to do stuff to your pension, you get told to burger off.

Trouble is, I don't really have any choice over what wrapper product I use as to benefit from an employer contribution, you have to use whatever the employer uses. That means that you are lumbered with the company IFA too.

In reply to ByEek:


That would really surprise me if it was allowed? I would check, or simply phone again and see if you get a different answer!

In reply to MG:

It is now done. There is certainly no way I can take advantage of my company contribution without their IFA taking his cut.

In reply to m0unt41n:


I use HL, which I did without consulting an IFA. I consolidated all my previous company pensions online, took a couple of days in total.

In reply to ByEek:


No, it isn't. The Stakeholder Pension you're talking about is a scheme provided for you by your employer in conjunction with a pensions provider. Thus your employer is the "customer" as that pensions provider sees it, which is why they won't talk to you.

A SIPP is different, you arrange that yourself with a pensions provider, and thus you are the customer, and have control of it.

So, the requirement to use an IFA is not a general rule, merely a rule of the scheme set up by your employer.

In reply to Coel Hellier:


Well there we go then. Wham bam and thanks very much for your 1%!

In reply to Coel Hellier:

Not necessarily. I have a Stakeholder pension independent of any employer. For simple stuff they are slightly cheaper than SIPPS I find

In reply to planetmarshall:

Had to laugh. Hargreaves Lansdown were an IFA until recently and went to a restricted advice status and charge fixed fees or telephone advice etc.

Just shows how confusing it is!!!!

In reply to neilh:


They do still charge a 0.45% management fee on their SIPP, up to £250K.

In reply to Everyone:

Thanks for all the responses. TBH I'm quite surprised. I was expecting at least a few comments defending IFAs and explaining what they do. It appears that in the opinion of UKC they really are just a rip-off.
I didn't realise I would be able to set up a pension and transfer my old stakeholder one in without an IFA, I wish I'd asked on here before I paid one to do it!
On the other hand, I do require proper financial advice from time to time. I'm numerically literate, but I find the whole business of funds and investment so excruciatingly dull that I struggle to make decisions. Also, the last thing I want to be doing is monitoring the performance of my pension. It's just stress watching it drop and then go back up again, I'd rather just leave it in a decent managed scheme and not have to think about it. And there's other stuff apart from pensions. There are schemes and ideas that I have no idea even exist, so I'd like to have someone suggest new options relevant to me. I don't mind paying a reasonable amount for someone to do all this, but even 0.5% every year is way more than it's worth.

In reply to Deri Jones:


That's definitely not what I want to be doing.


Exactly!

In reply to Hooo:


You don't totally need an IFA for that. You could -- for example -- contact the above-mentioned Hargreaves Lansdown, ask to set up a SIPP, and then go with one of their standard packages. You would be paying them their ongoing charges, but you'd have effectively cut out the IFA and the IFA's charges.

Go to: http://www.hl.co.uk/pensions/sipp

And then pick an option from

http://www.hl.co.uk/pensions/sipp/investment-ideas-for-your-sipp

In reply to Hooo:


You'll need to give a tad more detail about what sort of thing you're thinking of to get a sensible answer.

In reply to Coel Hellier:

I didn't mean someone on UKC!
I meant I would like to pay someone who keeps abreast of financial schemes to look at my circumstances and suggest ideas I might not be aware of. An independent person offering financial advice, if you see what I mean.

In reply to Hooo:


Something like an Independent Financial Advisor you mean?

In reply to Coel Hellier:


Well exactly. That's what I thought I wanted. But it turns out that my IFA doesn't appear to offer advice on anything other than pensions, and wants an exorbitant sum for that.

I'm surprised that people still use HL. They have a big internet presence making them one of the first to appear in any search. Once on their site they have a lot of info and good free tools but their paid-for service has steep charges.
For cheap no-advice investments then Degiro look unbeatable, I've opened a small account with them to see how it goes.

For IFA's, you need a big pot before they become worth having. In my limited experience, the small guys concentrate too much on tax and not enough on using capital. For most people some simple advice followed by self selected and managed investments is the most cost effective route to go down, if they're prepared to put in a little work. Once the non-pension pot increases to 500K to 1million then some of the more specialist IFAs who can give tax advice will start to pay for themselves.

In reply to Billy the fish:


If you hold investment trusts at HL it's very cheap; for unit trusts, though, there are indeed cheaper options.